Malawi - Lilongwe Land Development (Phase Three) Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 3414 PROJECT PERFORMANCE AUDIT REPORT MALAWI LILONGWE LAND DEVELOPMENT PROGRAM PHASE III (CREDIT 550-MAI) April 7, 1981 Operations Evaluation Department This document has a restricted distribution and may be used by recipients only in the performance of their oflicial duties. Its contents miay not otherwise be disclosed without World Bank authorization.  ABBREVIATIONS ADMARC - Agricultural Development and Marketing Croporation LLDP - Lilongwe Land Development Program MANR - Ministry of Agriculture and Natural Resources NRDP - National Rural Development Program RMEA - Resident Mission in East Africa  FOR OFFICIAL USE ONLY PROJECT PERFORMANCE AUDIT REPORT MALAWI LILONGWE LAND DEVELOPMENT PROGRAM PHASE III (CREDIT 550-MAI) TABLE OF CONTENTS Page No. Preface ...................................................... i Basic Data Sheet ............................................... ii Highlights .................................................... iv PROJECT PERFORMANCE AUDIT MEMORANDUM I. SUMMARY ............................................. 1 The Program ..................................... 1 Major Findings of Audits for Phases I and II .... 2 II. Main Issues ......................................... 3 A. Relative Emphasis on Infrastructure Development.. 3 B. Institution Building ............................ 4 C. Program Production Targets ...................... 5 D. Monitoring and Evaluation ....................... 9 E. Supervision Missions ............................ 9 III. Conclusion .......................................... 10 ATTACHMENT: (1) Covering Note to the PCR prepared by RMEA .... ....... 12 (2) PROJECT COMPLETION REPORT 1. Introduction and Summary ....................... 17 2. Background ..................................... 18 3. Formulation .................................... 19 4. Implementation ................................. 21 5. Impact ......................................... 36 6. Financial Performance .......................... 53 7. Institutional Performance ...................... 55 8. Rate of Return ................................. 62 9. Discussion and Conclusions ..................... 64 Annexes 1 - 8 68-139 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may-not otherwise be disclosed without World Bank authorization.   PROJECT PERFORMANCE AUDIT REPORT MALAWI LILONGWE LAND DEVELOPMENT PROGRAM PHASE III (CREDIT 550-MAI) PREFACE This is a performance audit of Phase III of the Malawi Lilongwe Land Development Program for which Credit 550-MAI in the amount of US$8.5 million was approved in March 1975. The final disbursement was made on July 11, 1979 and the credit was closed on June 30, 1979, as planned. The audit report consists of an audit memorandum prepared by the Operations Evaluation Department (OED) and a Project Completion Report (PCR) dated November 1979. The PCR was prepared by the Government of Malawi. RMEA contributed the project overview to the PCR. The Audit Memorandum is based on a review of the Appraisal Report (No. 652-MAI) dated February 28, 1975, the President's Report (No. P-1583-MAI) of March 10, 1975, the Credit Agreement dated May 27, 1975 and the PCR. Correspondence with the Borrower and internal Bank Memoranda on project issues as contained in relevant Bank files have been reviewed. Bank staff associated with the project have been interviewed. An OED mission visited Malawi in October 1980. The mission held discussions with officials of the Ministry of Agriculture and Natural Re- sources and project management. A field trip was made and discussions held with farmers and community leaders. The information obtained during that mission was used to test the validity of the conclusions of the PCR and permitted discussion of project design and institutional aspects. A copy of the draft report was sent to the Borrower on December 29, 1980 for comments but none were received. The PCR is thorough and frank in its assessment of project achieve- ments and shortcomings, but the audit has reservations on some of the causal relationships presented in the report. The issues discussed in the audit memorandum are selected on the basis of their importance to the Government and future Bank work. The assistance provided by the Government and the project staff in the preparation of this report is gratefully acknowledged.  I S0  - ii - PROJECT PERFORMANCE AUDIT BASIC DATA SHEET MALAWI LILONGWE LAND DEVELOPMENT PROGRAM, PHASE III (CREDIT 550-MAI) KEY PROJECT DATA Appraisal Actual or Item Expectation Current Estimate Total Project Cost (US$ million) 12.03 13.26 Cost overrun (%) - 10.2 Credit amount (US$ million) 8.5 8.5 Disbursed ) 8.5 8.5 Cancelled ) September 30, 1980 - - Outstanding ) 8.5 8.5 Date Physical Component Completed 3/78 3/79 Time Overrun (%) - 33 Economic Rate of Return /a (%) 13 25 DISBURSEMENT (US$ 000) 1975/76 1976/77 1977/78 1978/79 Appraisal Estimate Yearly 870 3,270 2,580 1,780 Cumulative 870 4,140 6,720 8,500 Acutal Yearly 1,441 2,580 2,516 1,963 Cumulative 1,441 4,021 6,537 8,500 Actual/Estimate (%) 165 0.97 0.97 100 OTHER PROJECT DATA Original Actual or Item Plan Revisions Estimate Actual Board Approval 03/20/75 Credit Agreement Date 05/27/75 Effectiveness Date 08/29/75 08/12/75 Closing Date 06/30/79 06/30/79 Borrower Government of Malawi Executing Agency Ministry of Agriculture and Natural Resources Fiscal Year of Borrower April 1 to March 31 Follow-on Project National Rural Development Program Credit Number Cr. 857-MI Credit Amount US$22 million /a For all three phases of the program.  I  - iii - MISSION DATA Month No. of No. of Man- Date of Origin Year Persons Weeks Weeks Report Supervision X T/ RMEA 11/75 1 2 2 Supervision RMEA 02/76 2 1 2 03/08/76 Supervision XII RMEA 09/76 1 1 1 10/29/76 Supervision XIII RMEA 1-2/77 2 3 6 Supervision XIV RMEA 1 4 4 03/14/77 Supervision XIV RMEA 9-10/77 1 2 2 01/09/78 Supervision XV RMEA 06/78 1 1 1 Supervision RMEA 07/78 1 1 1 09/12/78 Completion_/b RMEA 03/79 1 2 2 04/11/79 Completion RMEA 10/79 1 1 1 10/29/79 RATES OF EXCHANGE Name of Currency Malawi Kwacha (MK) Appraisal Year Average 1975 Exchange Rate US$1 = MKO.83 Intervening Years Average US$1 = MKO.86 Completion Year Average 1979 US$1 = MKO.81 /a Supervision mission numbers pick up the series started in Phases I and II. /b Government estimates that the preparation of the PCR required 20 manweeks. In addition, RMEA devoted to it 3 manweeks of field work. Bank expecta- tions for the preparation of PCR's is about 10 manweeks.   - iv - PROJECT PERFORMANCE AUDIT REPORT MALAWI LILONGWE LAND DEVELOPMENT PROGRAM PHASE III (CREDIT 550-MAI) HIGHLIGTS The Lilongwe Land Development Program (Credit 550-MAI) was designed in 1966 to help create a suitable environment for increased crop production in a then depressed, but high potential area of Malawi. The program extended over the period 1968-1978 and was implemented in three phases. Program costs amounted to US$27.7 million to which IDA contributed three credits totalling US$21.7 million. The program aimed at a target population of about 109,000 farm families and covered an area of about 1.2 million acres. The audit reviews progress during the third and final phase of the program. However, as may be expected, the issues raised and the results analyzed are the product of actions taken over the three phases. Similarly, Government has made a com- mendable effort in preparing the Project Completion Report and the Bank's RMEA has done an excellent job in encouraging and assisting in the effective handover of this responsibility. Phase III of the program consisted of a continuation of infrastruc- ture development, including land development, reorganization and registration, construction of marketing and storage facilities, office space and staff housing, provision of extension, training and credit services, initiation of the integration of livestock and crop production activities, provision of health services in the program area, and program monitoring. The physical implementation of the program was a success. Govern- ment gave qualified and motivated expatriate staff support and the needed flexibility to direct an efficient and timely construction of project works. Within the constraints imposed by the policy framework and the country overall conditions, project management also succeeded in providing farmers with reasonably efficient extension, credit and marketing services. The major shortfall of this program is that despite the progress made, it did not go far enough in lessening Malawi's dependence on outside technical assistance and in contributing to the creation in Malawi of an internally generated, self- sustained development process. Morever, many lessons learnt from this experi- ence still remain to be incorporated in other development activities in the country. The reestimated rate of return is 25% compared to the initial appraisal estimate of 13/4. The following points may be of particular interest: - Government did not contribute the full policy input needed for successful implementation of tne program (PPAM paras. 19 to 22);  a  -v - the shortfall in achieving yield targets of the program may be attributable to the lack of sufficient adaptation of tech- nological advice given to farmers and to on-farm economic considerations rather than to the inefficiency of the extension service (PPAM paras. 17 to 19; PCR paras. 5.5.1 to 5.5.4); and involvement of target population in the development process through village committees was successfully initiated (PPAM para. 27, PCR paras. 5.13.1 to 5.13.6).   PROJECT PERFORMANCE AUDIT MEMORANDUM MALAWI LILONGWE LAND DEVELOPMENT PROGRAM PHASE III (CREDIT 550-MAI) I. SUMMARY The Program 1. The Lilongwe Land Development Program (LLDP) was prepared in 1966 for an area of recognized high agricultural potential in response to (i) threatening soil erosion due to rapid deterioration of the natural vegetation cover and (ii) population pressure on the land base which was reinforcing land fragmentation and the subsistence nature of agriculture. The program objec- tive as stated in the Phase I Appraisal Report was "to raise agriculture production (maize, tobacco, groundnuts) by increasing yields and ensuring the effective use of all suitable land, and by furthering the transition from a subsistence to a market economy. The program-s intermediate objectives included infrastructure development (feeder roads, marketing facilities, domestic water supply, soil conservation works and buildings) and provision of services to farmers (extension, marketing, credit, input supply, land use planning, land registration, and health). These intermediate objectives remained consistent over the three phases, except for the addition of support for livestock activities starting in Phase II and for health facilities in Phase III. The LLDP emphasized rural infrastructure development, implemented through capital intensive technology, with heavy reliance on expatriate management operating virtually independently of existing public institutions. 2. The LLDP was implemented over the ten years 1968-1978 in three phases: IDA Credit Amount Total Cost Phase Number (US$ M) (US$ M) Period I 113-MAI 6.00 7.00 1968-72 II 244-MAI 7.25 8.59 1971-75 III 550-MAI 8.50 12.10 1975-78 21.75 27.60 The difference between total program costs and IDA credits was financed from internal sources except for a grant of US$1.6 million from the United Nations Capital Development Fund during Phase III. The Phase I Credit Agreement was closed, fully disbursed ahead of schedule, in August 1972 (Project Performance Audit Report No. 751, dated May 23, 1975). The Phase II Credit Agreement was closed, fully disbursed on schedule in March 1976 (Project Performance Audit Report No. 1597, dated May 17, 1977).  -2- 3. Phase III, the subject of this report, was appraised in 1975 as a three-year investment representing the final phase of the program which was broadly defined in 1966-67. The area covered by LLDP increased from the Phase I target of 500,000 acres to 1.0 million acres in Phase II and 1.2 million acres in Phase III. The LLDP was initially planned to directly affect: the lives of an estimated 53,500 families by 1978-79. As a result of the area expansion the target population increased to about 109,000 farm families representing about 10% of the country's rural population. A detailed descrip- tion of the Project is provided in Annex III(a) of the PCR. The major innova- tion in Phase III was the expansion of livestock activities to cover poultry and dairy development programs and the inclusion of funds for the expansion and improvement of health facilities in the program area. An agreement for a credit of US$8.5 million was signed on May 27, 1975, became effective! August 12 of the same year, and was closed fully disbursed in June 1979, as expected. Major Findings of Audits for Phases I and II 4. On basic project design, the PPAR for Phase I raised the question of whether a less capital-intensive approach could have been adopted at least for part of the infrastructure development. The financial and time advantages of the capital intensive approach were recognized but "an opportunity seems to have been missed to stimulate a powerful local commitment to the program and to promote early on a sense of local self-identity. Indeed, in some cases the program actually pre-empted the activities of local people who had organized themselves to provide their own conservation works." 5. The Phase I PPAR also found that built-in monitoring and evaluation had failed to provide the necessary material for evaluating accomplishment at LLDP on the basis of appraisal